FCA's U.S. car output to go to Mexico in UAW-deal production shuffle

Ram 1500s to switch Michigan plants; $5.3B committed to U.S. plants, report says

The Warren Truck plant in Michigan would be retooled and converted from body-on-frame construction to unibody construction to eventually build the Jeep Grand Wagoneer.

UPDATED: 9/17/15 1:04 pm ET - adds FCA commitment

DETROIT -- A tentative labor agreement between Fiat Chrysler and the UAW would move U.S. car production to Mexico and concentrate SUV and crossover production in the U.S., Automotive News has learned.

According to sources, production of the Ram 1500 pickup would move from Warren Truck to Sterling Heights Assembly during the life of the proposed four-year contract. As a result of that move, the Chrysler 200 sedan would move from Sterling Heights Assembly to FCA’s assembly plant in Toluca, Mexico.

Ratification votes were expected to begin next week.

All told, FCA would commit to $5.3 billion in U.S. plant investments, the Detroit Free Press reported today. 

The Toluca plant currently builds the North American version of the Fiat 500 and Dodge Journey. Production of the 500 will be concentrated in Poland, where European versions of the car are made.

The Jeep Cherokee, the brand’s top-selling vehicle in the U.S. through August, would move from Toledo Assembly Complex to Belvidere Assembly in Illinois. Belvidere will lose production of the Dodge Dart, which will also move to Toluca.

The half of Toledo Assembly that builds unibody vehicles will be converted to body-on-frame production to build the next-generation Jeep Wrangler, due in 2017, as Automotive News reported Sept. 1.

The existing Wrangler plant will be retooled to build a Wrangler-based pickup.

Warren Truck in Michigan would be retooled and converted from body-on-frame construction to unibody construction to eventually build the Jeep Grand Wagoneer, a three-row luxury SUV that seats eight.

CEO Sergio Marchionne said earlier this summer that the Grand Wagoneer would share a platform with the next-generation Grand Cherokee. If that is the case, then Warren Truck could potentially also build two-row Grand Cherokees, if additional production is needed beyond the capacity of the Grand Cherokee’s home plant, Jefferson North Assembly in Detroit.

A source inside FCA said that Ram 2500 and 3500 pickups would continue to be assembled in the automaker’s massive complex in Saltillo, Mexico.

Production of the Dodge Viper would stay in Detroit at Connor Avenue Assembly. 

Other details of the company’s production plans weren’t available, including where it would build the replacement for the Jeep Compass and Patriot, a promised Chrysler 100 sedan as well as promised midsize and full-size crossovers coming for the Chrysler brand.

FCA spokesman Gualberto Ranieri declined to comment.

Early hint

In an interview Aug. 21 with Automotive News, Marchionne hinted at the company’s production strategy going forward. And he admitted that to pull it off, he will need the assistance of FCA’s 37,000 UAW hourly employees.

Automakers, Marchionne said, “were threatened by [the UAW], so we took all the pickup trucks that we sell -- and 90 percent of those pickup trucks are sold in this country, right? -- we took it away and then we delocalized them,” to Mexico.

“The only thing [the UAW] want(s) is to move the truck back. Which is right. If you move the truck back here, which is [the UAW’s] domain, [and move] all the cars that we get killed on somewhere else, we could actually make sense of this bloody industry and actually increase the number of people employed in this country and really share wealth because we are making money,” Marchionne explained.

“What a wonderful idea,” the CEO said: “Distributing cash when you have it.”

The moves would be a dramatic change for Warren Truck, which has been building pickups for FCA and its corporate predecessors since 1938.

Provisions in the current UAW agreement allow workers to transfer with a vehicle if their work is moved. Warren Truck is about 10 miles due south of Sterling Heights Assembly in suburban Detroit.

Economic details

Bloomberg reported late Wednesday that under the tentative agreement, FCA will pay UAW members $3,000 bonuses if they ratify the new contract in the coming days, citing people briefed on the matter.

While that’s a smaller payout than workers received for approving the previous contract four years ago, the union won raises for all members.

Union members will receive hourly wage increases of as much as a dollar an hour, one of the sources, who asked not to be identified because the details haven’t been explained to members yet, told Bloomberg.

Senior assembly workers, who now make about $28 an hour, would get raises in two steps that could bring their hourly wage to almost $30, said the person. The newer, or second-tier workers, could earn as much as $25 an hour after eight years of service, said the person.

Automotive News has learned that other monetary incentives included in the contract are available if workers excel under the tenets of FCA’s World Class Manufacturing system.

Getting raises for both groups of assembly workers was a key goal for UAW President Dennis Williams in these negotiations. Senior workers at FCA hadn’t had a raise in nine years, while their counterparts at Ford Motor Co. and General Motors hadn’t had one in a decade.

Union locals will present the details to members before they vote, and Williams will proceed to reach similar -- though presumably more lucrative deals -- with GM and Ford.

“We believe we have met the goals,” Williams said Tuesday night. “But ultimately our membership will make the final decision.”

He and Marchionne declined to reveal specifics of the contract -- even its length -- before members were presented with the details. Williams, however, seemed to indicate that it would be another four-year agreement.

Bloomberg contributed to this report.

You can reach Larry P. Vellequette at lvellequette@crain.com -- Follow Larry P. on Twitter: @LarryVellequett

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